The social housing sector has become ‘increasingly commercialised’ as housing associations look for new ways to make money, report find.
A new report from Zurich Municipal has found difficult times and dwindling revenue streams has forced Registered Providers (RPs) of housing to turn to ‘non-core’ activities, such as social care or operating leisure centres, to make money.
A previous report by the public sector insurer had found that 76% of RPs had introduced new services beyond their core role as a housing provider.
The metamorphosis of social housing: a CEO perspective, which is based on in-depth interviews with the CEOs of several housing associations, revealed that some housing associations are now generating up to half their income from non-core activities.
The commercialisation of housing associations follows economic changes and welfare reforms, such as the recent cut to social housing rents, the report argues.
It is estimated the cut to social housing rents alone has forced housing associations to maintain higher operating margins to protect their creditworthiness.
The roll-out of Universal Credit has also forced housing associations to make changes.
According to PHHS Ltd, who are cited in the report, an average housing association with around 5,000 properties and a £20m annual rent roll will now have £12m in rent ‘at risk’ each year as a result of the introduction of Universal Credit.
Access to finance was also identified as a major issue for RPs, with many CEOs explaining that they are finding it more difficult to borrow money at the low interest rates they had been offered in the past.
The report also explored some of the risks associated with the change in approach of RPs and found that the need to tighten belts has caused a re-evaluation of the way RPs manage their housing stock, both in terms of the way they are built and how refurbishments are carried out.
‘Housing associations have traditionally been very risk-averse. But difficult circumstances have led many CEOs to reassess the way they look at risk as they seek to use commercial opportunities to build resilience into their organisations,’ said Allison Whittington, head of housing at Zurich Municipal.
‘RPs have so far done an excellent job in not allowing commercialisation to divert them from their natural instincts to provide good quality and affordable housing to society.
‘Going forward however, it’s vital that RPs continue to work with their partners to make sure they strike a sensible balance between the benefits of a commercial opportunity and the level of risk they are willing to take on as an organisation.’